Smithfield Foods to close 425-worker Portsmouth plant by early 2013

SMITHFIELD — Smithfield Foods Inc. said Thursday that it will close its 425-worker Portsmouth processing plant by early 2013 and shift those operations to North Carolina, which lured the company with an incentive package worth up to $1.4 million.

The Smithfield-based hog producer and pork processor said the layoffs in Portsmouth will be phased in over a several-month period beginning next year. Some of the plant's employees will be offered transfers to other Smithfield Foods facilities in Virginia and North Carolina.

Jeff Gough, Smithfield's vice president of human resources, said the company has not yet determined how many or what type of workers could remain with the company, but said: "We hope to have opportunities for a majority of the employees."

Production capacity at the 40-year-old Portsmouth plant, which makes hot dogs and lunch meat, will be transferred to another Smithfield plant in Kinston, N.C., about 75 miles east of Raleigh.

Smithfield Packing President Tim Schellpeper said the company "deeply regrets having to close" the aging Portsmouth plant, which he said "cannot support the changes in manufacturing technology and product development necessary to meet our needs."

"We recognize that layoffs and plant closings are difficult for everyone concerned. But at the same time, we believe this is a necessary business decision," Schellpeper said in a news release.

As part of the move, the company plans to spend $85.5 million to expand and update the Kinston plant. Smithfield also plans to add 330 jobs there over the next three years, according to a news release from North Carolina Gov. Bev Perdue.

North Carolina offered the company a $700,000 grant through its One North Carolina Fund, which is similar to Virginia's Governor's Opportunity Fund. As required under the fund, the grant money was matched by Lenoir County.

Smithfield will not receive any of the money up front and will be required to meet job-creation and capital investment benchmarks to qualify for the money.

Virginia economic development officials were not contacted in advance of the announcement and were not offered an opportunity to present a competing incentive package to keep the plant in Portsmouth, said Suzanne West, a spokeswoman for the Virginia Economic Development Partnership.

"Obviously, this scenario is undesirable," West said. "But we were told that the facility in Portsmouth could not be retrofitted to accommodate Smithfield's new technology and equipment. They said there was no cost-benefit to upfit their current facility, which they felt they had outgrown."

The company acquired the plant in 1981 as part of its $35 million purchase of Gwaltney.

Smithfield said it does not know yet what it will do with the 140,000-square foot facility, which sits on 13 acres between U.S. Route 58/460 and Interstate 264 in the southwest portion of the city.

But West said the company plans to donate the 140,000 square-foot facility to Portsmouth, which gives the city "a viable option to jump back in and promote economic development."

Gough insisted that a final decision on the plant's fate has not been made, and said the company will begin negotiating the 2013 closure with the union that represents the facility's workers in coming weeks.

About 85 percent of the plant's employees are hourly workers represented by the International Brotherhood of the Teamsters Local 822. The union's local president, James Wright, could not be reached for comment.

Workers at the Portsmouth plant were told on Thursday of the plan to shutter the plant, around the same time the company issued its news release.

Smithfield officials assured the city that it would work to retain the plant's employees and transition them to jobs in Smithfield over the next 12 to 18 months, said Patrick Small, director of Portsmouth's Economic Development Department.

"Portsmouth has enjoyed a long and productive relationship with Smithfield Foods/Gwaltney and the company is a significant primary employer of city residents" both in Portsmouth and in Smithfield, Small said.

The plant's closure will be a blow to Portsmouth, where it is the city's ninth largest employer and a significant source of tax dollars, according to a June 2011 report.

But Portsmouth's loss is North Carolina's gain.

Schellpeper's downbeat statements in the Virginia release contrast with how he's quoted in the North Carolina announcement: "We are pleased that this project will bring additional jobs to North Carolina and add revenue to the local economy," he said. "North Carolina is a great place to live and work, and we are delighted to contribute to the growth of this region."

Smithfield closed its sprawling South Packing Plant in Smithfield in early 2010. Although that plant once employed more than 1,300 workers, only about 30 lost their jobs as part of the closure. Most of those workers were transferred to company's adjacent North plant where the company completed a $22 million expansion.

Earlier this year, the company shuttered another small production facility in Smithfield that employed 53. The company said at the time that expected to retain all of those workers.